Yours are Forbes daily briefing for Wednesday, January 10th. Today on Forbes, our two Chinese brothers became billionaires from $1.00 bubble teas. When he was just 21 years old, Zhang Hung Chow, borrowed money from his grandmother to open a small stall selling shaved ice treats in the central Chinese city of Zhengzhou that first stored didn't make it. But two years later, he tried again with a second shaved ice stall, this time named Mixue Bingcheng, meaning Sweet Snow Palace.
Over time, the business took off as he shifted to selling ice cream and later bubble tea, lemonade and coffee drinks at dirt cheap prices. Now Mixue Bingcheng, which has roughly 36,000 stores and is China's biggest bubble tea maker, is on the verge of going public. And Zhang, now 47 years old, and his younger brother Hongfu, who is 39 years old, are billionaires, according to Forbes estimate.
Mixue filed for an initial public offering in Hong Kong last week, revealing the ownership details of the company. Each brother currently holds a 42.8% stake in the business. In the first nine months of 2023, Mixue's revenue jumped 46% to $2.2 billion and its net profits jumped 48% with $338 million, Forbes conservatively estimates that Mixue is worth $2.9 billion that puts the Zhang's net worth in an estimated $1.2 billion apiece.
The privately held bubble tea maker last raised money in January 2021 during the funding bubble, pulling in $329 million at a $3.3 billion valuation from investors, including billionaire Lei Zhang's Hillhouse Capital and Dragon Ball Capital-the venture arm of billionaire Wang Xing Meituan. Mixue filed for a $915 million IPO in Shenzhen back in 2022, but it never materialized.
Mixue, which has 32,000 nearly all franchised stores in China and another 4000 in 11 other mostly Asian countries, didn't respond to a request for comment on the company's valuation or the brothers net worth. According to the prospectus, its stores sold about 5.8 billion drinks worldwide during the first nine months of 2023, making it the second biggest global seller of freshly made drinks by cups sold according to China insights industry consultancy, the number one seller is Starbucks.
The company stands out in the crowded bubble tea market for its bargain prices, earning the nickname "Pinduoduo of Bubble Tea" after billionaire Colin Huang's popular Chinese discount e-commerce platform - Pinduoduo's US shopping site "Timu" launched in 2022. Mixue's products, which also include freshly made lemonade, soft serve ice cream, fruit, tea and coffee, cost between three cents, roughly the price of a can of coke in China, and $1.00. That compares with the average price of $3.80 that Nayuki, another popular Chinese bubble tea chain listed in Hong Kong, charges for its drinks. Mixue has said it is able to keep its prices low because of its end-to-end supply chain, covering everything from procurement and ingredient production to logistics, research and development and quality control.
Nearly all of its revenue and profits, meanwhile, come from sales of supplies such as kitchen appliances and food ingredients to franchisees. The Zhangs are the latest to make their fortune from bubble tea, which is popular among millennials, and GenZ in Asia and the US. Other bubble tea billionaires include Wang Xiaochun, the founder and chairman of Chop Panda, Peng Shin and Shaolin, husband and wife team behind Mixue's rival "Nayuki", became billionaires after the company's Hong Kong IPO in 2021, but the pair has since dropped out of the billionaire ranks following an 80% plunge in the share price triggered by food safety issues.
Source:
Forbes. (2024, January 10). How two Chinese brothers became billionaires from $1 bubble teas [Video]. YouTube. https://www.youtube.com/watch?v=EmILpI3NYvk